Taking a personal loan has become very simple today. With just a few documents and no collateral needed, many people apply for it to meet urgent needs like weddings, medical bills or travel. But what if you miss paying one EMI (Equated Monthly Installment)? While it may seem like a small thing, a missed EMI can harm your financial future in a big way. This mistake can stay in your credit history for many years and affect your chances of getting new loans or credit cards.
What Is a Credit Report and How Is It Affected?
Your credit report is a record of all your loans, credit card usage, repayments, defaults and delays. Credit bureaus like CIBIL (TransUnion), Experian, Equifax, and CRIF High Mark maintain this data. These agencies collect information from banks and NBFCs (Non-Banking Financial Companies) and build your credit report and score.
If you miss an EMI, the lender reports it to these credit bureaus. The missed payment then appears on your report and stays there for seven years from the date of default. This history affects your credit score, which usually ranges from 300 to 900. A score above 750 is considered good. A single missed EMI can drop your score by 50 to 100 points depending on your current credit history.
How Does a Loan Default Affect Your Financial Future?
When you apply for a new loan—whether it’s another personal loan, home loan or credit card—the bank first checks your credit report. If they find a default or low score:
- They may reject your loan or credit card application.
- If they approve the loan, they may charge a higher interest rate.
- The lender may ask for extra documents or collateral for safety.
- It may take months or even years to rebuild your score.
Banks believe that people who default once are more likely to default again. So, even a small delay in payment creates a bad impression.
Can You Reduce the Impact of a Missed EMI?
Yes, you can. If you missed an EMI by mistake or due to a temporary financial crisis, you should try to reduce the damage quickly. Here are a few ways to do that:
1. Clear Pending Payments Quickly
If you realise you missed an EMI, pay it as soon as possible. The longer you delay; the more damage it causes. Also, inform your lender and explain the reason for the delay. Some lenders may not report short delays if you communicate and pay quickly.
2. Get a No Dues Certificate
Once you repay your loan completely, ask the bank to issue a No Dues Certificate. This is proof that you have cleared all your dues. In some cases, this document can help during future loan applications.
3. Check Your Credit Report Regularly
Sometimes, lenders report wrong information or forget to update your report. Visit CIBIL, Experian, or Equifax websites and check your credit report once every 3–6 months. If you find any errors, raise a complaint immediately. Credit bureaus allow online corrections.
4. Avoid Too Many Loan Applications
Each time you apply for a loan, the lender checks your credit score. This is called a hard inquiry. If you apply for multiple loans or credit cards in a short period, it reduces your score even if you don’t take any loan. Apply only when necessary.
5. Use Secured Credit Wisely
If your credit score is low, try using secured loans or credit cards. For example, get a credit card against your fixed deposit (FD). Use it carefully and pay the full amount on time. This can help you rebuild your credit score.
RBI Rules on Credit Reporting
The Reserve Bank of India (RBI) has made it mandatory for banks and NBFCs to report loan details in a fair and transparent manner. As per the rules:
- Credit information must be accurate and updated.
- Customers must be given a chance to correct any errors in the report.
- Credit bureaus must respond to complaints and make changes after proper verification.
RBI wants to protect the rights of borrowers and ensure fair access to credit.
Will a Default Always Stay for 7 Years?
Technically, yes. A default entry stays in your credit report for 7 years. But its impact reduces over time if you follow responsible behaviour. Experts say that if you start paying bills and EMIs on time, limit your credit usage, and avoid too many loans, your score will slowly improve.
Within 12–24 months of responsible activity, banks will start trusting you again. Some NBFCs even provide loans to people with poor credit if they show recent discipline.
Smart Habits to Build a Healthy Credit Score
Here are some basic habits to protect and improve your credit health:
- Pay your EMIs and credit card dues on time every month.
- Try to repay loans before the due date if possible.
- Use less than 30% of your credit card limit.
- Avoid co-signing loans unless necessary.
- Keep your oldest credit card active—it builds a longer credit history.
- Don’t close old loan accounts that were paid properly—these are good records.
Final Tip for Borrowers
Personal loans are useful during emergencies. But they are still a liability, not free money. Take loans only when needed, keep track of due dates, and never ignore your credit score. Just like your health report, your credit report reflects your financial fitness.
Also, remember that even if you miss a payment by mistake once, it’s not the end. Start following the right steps, and you can get back on track.
Source: Financial Express, RBI Guidelines, CIBIL
Disclaimer: This article is for informational purposes only. Please consult a certified financial advisor for personalized advice.
